News:

"There is a terrible desperation to the increasingly pathetic rationalizations from the climate denial camp. This comes as no surprise if you take the long view; every single undone paradigm in history has died kicking and screaming, and our current petroleum paradigm 🐉🦕🦖 is no different. The trick here is trying to figure out how we all make it to the new ⚡ paradigm without dying ☠️ right along with the old one, kicking, screaming or otherwise." - William Rivers Pitt

Gabriel Zucman started his first real job the Monday after the collapse of Lehman Brothers. Fresh from the Paris School of Economics, where he’d studied with a professor named Thomas Piketty, Zucman had lined up an internship at Exane, the French brokerage firm. He joined a team writing commentary for clients and was given a task that felt absurd: Explain the shattering of the global economy. “Nobody knew what was going on,” he recalls.

At that moment, Zucman was also pondering whether to pursue a doctorate. He was already skeptical of mainstream economics. Now the dismal science looked more than ever like a batch of elaborate theories that had no relevance outside academia. But one day, as the crisis rolled on, he encountered data showing billions of dollars moving into and out of big economies and smaller ones such as Bermuda, the Cayman Islands, Hong Kong, and Singapore. He’d never seen studies of these flows before. “Surely if I spend enough time I can understand what the story behind it is,” he remembers thinking. “We economists can be a little bit useful.”

A decade later, Zucman, 32, is an assistant professor at the University of California at Berkeley and the world’s foremost expert on where the wealthy hide their money. His doctoral thesis, advised by Piketty, exposed trillions of dollars’ worth of tax evasion by the global rich. For his most influential work, he teamed up with his Berkeley colleague Emmanuel Saez, a fellow Frenchman and Piketty collaborator. Their 2016 paper, “Wealth Inequality in the United States Since 1913,” distilled a century of data to answer one of modern capitalism’s murkiest mysteries: How rich are the rich in the world’s wealthiest nation? The answer—far richer than previously imagined—thrust the pair deep into the American debate over inequality. Their data became the heart of Vermont Senator Bernie Sanders’s stump speech, recited to the outrage of his supporters during the 2016 Democratic presidential primary.

Zucman and Saez’s latest estimates show that the top 0.1% of taxpayers—about 170,000 families in a country of 330 million people—control 20% of American wealth, the highest share since 1929. The top 1% control 39% of U.S. wealth, and the bottom 90% have only 26%. The bottom half of Americans combined have a negative net worth. The shift in wealth concentration over time charts as a U, dropping rapidly through the Great Depression and World War II, staying low through the 1960s and ’70s, and surging after the ’80s as middle-class wealth rolled in the opposite direction. Zucman has also found that multinational corporations move 40% of their foreign profits, about $600 billion a year, out of the countries where their money was made and into lower-tax jurisdictions.

Share of U.S. Wealth Held by the Top 1%

Data: Gabriel Zucman

Like many economists, Zucman and Saez have embraced the political implications of their research. Unlike many, they champion policy recommendations that are bold and aggressive. Before Massachusetts Senator Elizabeth Warren started her 2020 presidential campaign by proposing a wealth tax, she consulted the pair, who estimated that her tax would bring in $2.8 trillion over the next decade. She conferred with them again before floating a corporate tax on profits above $100 million, which they calculated would raise more than $1 trillion over 10 years. Sanders came looking for their advice on his estate tax plan, which would establish rates as high as 77% on billionaires. And when New York Representative Alexandria Ocasio-Cortez proposed on 60 Minutes to hike the top marginal tax rate to as much as 70% on income above $10 million, Zucman and Saez were fast out with a New York Timesop-ed in support.

The pair has now written a cookbook of sorts for any 2020 candidate looking to soak the rich. The Triumph of Injustice, to be published by W.W. Norton & Co. early next year, focuses on how wealth disparity can be fought with tax policy. The tools Zucman has identified to date challenge a series of assumptions, fiercely held by many economists and policymakers, about how the world works: That unfettered globalization is a win-win proposition. That low taxes stimulate growth. That billionaires, and the superprofitable companies they found, are proof capitalism works. For Zucman, the evidence suggests otherwise. And without taking action, he argues, we risk an economic and political backlash far more destabilizing than the financial crisis that sparked his work.

The Wealth Detective

The Wealth Detective

America’s top wealth detective probes the secrets of the super rich in a tidy, white-walled office with an enviable view of the San Francisco Bay. His methods are unusually brute-force compared with those of recent-vintage U.S. economists, relying not on powerful computers, regression analyses, or predictive models, but on simple, voluminous spreadsheets compiling the tax tables, macroeconomic datasets, and cross-border-flow calculations of central banks. He does it on his own, only rarely outsourcing to graduate students.

“You can conduct this detective work only if you do it to a large extent yourself,” he says. “The wealth is not visible in plain sight—it’s visible in the data.” Lately, he adds, the Bay Area humming outside his window, “I see more of Silicon Valley in my Excel spreadsheets, especially in the amount of profits booked in Bermuda and Ireland.”

Born and raised in Paris, Zucman is the son of two doctors. His mother researches immunology, and his father treats HIV patients. Politics was a frequent dinnertime topic. He says the “traumatic political event of my youth” occurred when he was 15. Jean-Marie Le Pen, founder of the far-right National Front party, edged out a socialist candidate to win a spot in the final round of 2002 presidential voting. Zucman remembers joining the spontaneous protests that followed. “A lot of my political thinking since then has been focused on how we can avoid this disaster from happening again,” he says. “So far, we’ve failed.” (Le Pen’s daughter made the presidential runoff in 2017 and won almost twice as many votes as her father.)

Zucman met his future wife, Claire Montialoux, in 2006, in a university economics class. She’s now finishing her Ph.D. dissertation, which shows how the U.S.’s expansion of the minimum wage in the late 1960s and ’70s helped black workers, narrowing the racial earnings gap. “We share the same vision for why we are doing social sciences,” Zucman says. “The ultimate goal is how can we do better?”

His own graduate work in Paris saw him compile evidence that the world’s rich were stowing at least $7.6 trillion in offshore accounts, accounting for 8% of global household financial wealth; 80% of those assets were hidden from governments, resulting in about $200 billion in lost tax revenue per year. At the same time, he was helping his adviser, Piketty, pull together more than 300 years of wealth and income data from France, Germany, the U.K., and the U.S. They co-authored a paper on the numbers, which became a key part of Piketty’s surprise 2014 bestseller, Capital in the Twenty-First Century. The following year, Zucman’s doctoral research was also published as a book, The Hidden Wealth of Nations.

He arrived in the U.S. in 2013, the same year President Obama was declaring inequality “the defining challenge of our time.” Zucman had been recruited to Berkeley by Saez, winner of economics’ prestigious John Bates Clark Medal in 2009 and a MacArthur Fellowship in 2010. They took up offices next to each other and set about trying to solve the riddle of America’s hidden wealth, unveiling their estimates as a draft paper the following year.

Saez

PHOTOGRAPHER: CAYCE CLIFFORD FOR BLOOMBERG BUSINESSWEEK

None of it was easy. Tax collectors such as the IRS generally require taxpayers to report income, not wealth. And much of the world’s wealth is held in forms—homes, art, retirement accounts, non-dividend-paying stocks—that produce no income prior to a sale. A real estate mogul with a billion-dollar property portfolio and billions more in cash stashed overseas can still report a tiny income. Most inequality researchers therefore rely on voluntary surveys, which often fail to identify enough of the very richest, or data on the estate tax, which has gotten easier and easier to avoid.

Zucman and Saez started with the IRS. The agency opens its doors to researchers under strict conditions, and only Saez, a U.S. citizen, was allowed inside a facility, where he downloaded anonymized statistics up to the extreme end of the income scale. The duo then translated the data into wealth estimates. Saez had had the idea for a while. “I was doubting how that could actually be done, because there are so many complications,” he says. “And then Gabriel came along.” With each asset class, from equities and real estate to pensions and insurance, they painstakingly estimated the relationship between income and wealth in the U.S., checking and tweaking based on data from external sources.

They found that something cataclysmic happened around 1980. As Ronald Reagan was winning the White House, the top 0.1% controlled 7% of the nation’s wealth. By 2014, after a few decades of booming markets and stagnant wages, the top 0.1% had tripled its share, to 22%, a bit more wealth than the bottom 85% of the country controlled. The data showed the extent of the problem and the absence of a solution: In the aftermath of the financial crisis, while middle-class Americans were burdened by job losses and debt, the rich had swiftly resumed their party. Wealth that had vanished from financial markets after Lehman’s collapse had reappeared, doubling and tripling the portfolios of well-off investors.

Some eminent economists, including the University of Chicago’s Amir Sufi and Nobel laureate and New York Timescolumnist Paul Krugman, endorsed the findings, but others were skeptical. The new numbers were much higher than previous estimates, including those of the Federal Reserve’s Survey of Consumer Finances, which is based on detailed responses provided by Americans and is widely considered the best measure of U.S. wealth.

The disputes over Saez and Zucman’s methodology were highly technical. Fed economists said the Berkeley pair were underestimating the investment returns the very rich were earning, which had the counterintuitive effect of overestimating the fortunes from which they drew their income. Saez and Zucman rejected that criticism but made other adjustments to their method and updated the numbers to reflect revised macroeconomic data. Their estimate of the 0.1%’s wealth share dropped a couple of percentage points, to about 20%, still a startling figure. Then, in 2017, the Fed released a survey incorporating methods it said better captured the wealth of the very rich; the central bank cited Zucman and Saez’s work in an accompanying paper. Its latest figures showed a jump in inequality, with the top 1%’s share rising from 36% in 2013 to 39% in 2016, matching the pair’s estimate.

At conferences and seminars, Zucman’s peers still occasionally sound baffled by his work. Economists often aim for precise, unassailable conclusions, but he’s “comfortable getting a ‘rough justice’ answer to a question” if it helps fill in a big gap in knowledge, says Reed College economics professor Kimberly Clausing, an expert on corporate profit shifting. “I admire the fact that he’s willing to look at these harder questions.” Saez says Zucman’s “defining characteristic is that he’s not moored to the traditional economic model.” In the end, Saez adds, “that gives him tremendous power to make progress.”

Economists argue over the timing and size of the U.S.’s inequality surge, but few deny the broader trend. We live in an age in which the richest man in modern history is reduced by divorce to merely the richest man alive and in which even the most generous billionaires can’t give away money faster than they’re bringing it in. The debate now raging is over how inequality deepened to this extent and what, if anything, to do about it.

On one hand are those who argue that great wealth is somehow natural, the result of technology, globalization, and pro-growth policies bestowing outsize rewards on the smartest and most resourceful. Returning to postwar marginal tax rates of 70% or higher, they say, would discourage innovation and hurt the economy. Ken Griffin, a hedge fund manager who made news in January by dropping $360 million on two abodes in London and New York, told Bloomberg News the following month that such tax hikes would represent attempts to “destroy the wealth creators of our society.”

Others see these types of proposals as necessary to address the economic and political distortions that lead to wealth stratification. In her campaign announcement, Warren described President Trump as “the latest and most extreme symptom of what’s gone wrong in America, a product of a rigged system that props up the rich and the powerful and kicks dirt on everyone else.” Even some billionaires have gotten the religion. In April, Ray Dalio, founder of Bridgewater Associates, the world’s largest hedge fund, called the widening U.S. economic divide a “national emergency” that, left unaddressed, will lead to “some form of revolution.”

Zucman sees ominous signs in the rise of the far right—the threat that has preoccupied him since he was a teenager on the streets of Paris. Inequality, he says, paves the way for demagogues. The causes he’s identified for the widening gap in the U.S. are a host of policy changes that started in the 1980s: lower taxes on the wealthy, weaker labor protections, lax antitrust enforcement, runaway education and health-care costs, and a stagnant minimum wage. America’s skyrocketing wealth disparity, he says, reflects that “it’s also the country where the policy changes have been the most extreme.”

When Reagan cut the top marginal tax rate from 70% to 28% across eight years, and later, when Presidents Bill Clinton and George W. Bush slashed tax rates for investors, they were doing so on the advice of economists. The prevailing belief, backed by theoretical models, was that lower taxes on the wealthy would stimulate more investment and thus more economic growth. The real world hasn’t been kind to those theories.

Since the era of liberalization and globalization began about 40 years ago, America’s economic growth has been markedly slower than it was the four decades prior. And though Zucman acknowledges that gross domestic product has risen faster in the U.S. than in other developed countries, he points out that the same is true of population. Measured in GDP per person or national income per adult, U.S. growth since 1980 is hard to distinguish from the pace in France, Germany, or Japan. Meanwhile, the typical worker was better off abroad. From 1980 to 2014, for example, incomes for the poorest half of Americans barely budged, while the poorest half in France saw a 31% increase. “The pie has not become bigger” in the U.S., Zucman says. “It’s just that a bigger slice is going to the top.”

Share of Wealth Within Select Countries, 2014

Data: World Inequality Database

The actual effect of lower taxes on the rich, he argues, isn’t to stimulate the economy but to further enrich the rich and further incentivize greed. In his analysis, when the wealthy get tax breaks, they focus less on reinvesting in businesses and more on hiring lobbyists, making campaign donations, and pursuing acquisitions that eliminate competitors. Chief executive officers, for their part, gain additional motivation to boost their own pay. “Once you’ve created a successful business and the wealth is established and you own billions of dollars, then what these people spend their time doing is trying to defend that position,” Zucman says.

Even some inequality researchers question his and Saez’s proposal to restore postwar tax rates, though. Columbia University’s Wojciech Kopczuk, who once studied estate tax data with Saez, says citing inequality as grounds for such changes sounds “like an ex post facto justification of things you would want to do anyway.” The consequences of these policies, he notes, might include causing truly innovative entrepreneurs to lose control of their businesses. “Once you start naming these problems, you realize there are other solutions,” he says. He suggests the U.S. would be better off aggressively enforcing antitrust laws or tightening campaign finance laws.

Zucman says the response to inequality must be aggressive because wealth is self-reinforcing. The rich can always earn more, save more, and then spend more than everyone else to get their way. He considers Trump’s 2017 tax law—which slashed rates on corporations, created a new deduction for business owners, and made the estate tax even easier to avoid—to be a textbook example. After decades of rising inequality and policies favorable to the top 0.1%, the U.S. delivered the rich a boatload of new goodies. “It’s hard not to interpret that as a form of political capture,” Zucman says.

“The wealth is not visible in plain sight—it’s visible in the data”

Inside a Berkeley lecture hall in February, Zucman stepped 100 or so undergraduates through a few centuries of inequality, from slavery and the Industrial Revolution to the internet and climate change. Dressed in black, bearded, and pacing the front of the lecture hall, he approvingly quoted the classical 18th century economist Adam Smith on trade’s powerful impact on growth. This, he pointed out, is how countries such as China and South Korea pulled themselves up from poverty—an example of how at least one form of inequality, between nations, was addressed.

For someone whose policy prescriptions are occasionally cast as radical, Zucman’s demeanor and rhetoric tend to the mild. He peppered the class with questions, urging reluctant undergraduates to offer their own explanations for economic history and stumbling briefly, despite his excellent English, over a student’s use of the expression “two heads are better than one.” He warned everyone that if the trends continue, their future could resemble the distant past.

In the slow-growing, hierarchical societies leading up to the 20th century, he said, the most important factor determining your economic prospects was the class into which you were born; from Italy to India, the poor stayed poor and the rich stayed rich. By the mid-20th century, though, the most crucial factor was the country of your birth. In the U.S. and Western Europe, rags-to-riches stories became common, if not routine. Maybe, Zucman warned, the 20th century was an egalitarian anomaly and inherited wealth would again dominate. The question, he said, is “how to have a meritocratic society when so much of wealth comes from the past.”

That day he also met with Saez to talk about a website the two were building. It had been a few weeks since Warren unveiled her wealth tax, and the men were creating a customizable tool to show the math underlying her proposal and let others formulate plans of their own. Saez mostly ran the meeting, but Zucman offered one suggestion: Give users the option of setting the rates as high as possible. Saez smiled and agreed.

Polls suggest that voters like Warren’s wealth tax, which would levy 2% on fortunes greater than $50 million and 3% on those higher than $1 billion. But the idea of taxing wealth, rather than income, alarms some policy experts and more than a few billionaires. Speaking on NPR, Howard Schultz, former Starbucks Corp. CEO and a potential independent presidential candidate, called Warren’s proposal “ridiculous,” adding, “You can’t just attack these things in a punitive way.”

Others question how the government would value the assets of the rich, including their private businesses. Ideas such as Warren’s “work very poorly in practice,” Columbia’s Kopczuk says. “There is a reason why many countries get rid of wealth taxes.” At least 15 European countries have tried them; all but four have repealed them, most recently France.

Zucman responds that most European wealth taxes are poorly designed and that the practical issues can be resolved. For starters, such taxes must be created without loopholes allowing money to be stashed in trusts or offshore accounts. Then, with the legal regime in place, data technology could help tax collectors such as the IRS track and value wealth. A worldwide financial registry—or, failing that, the collection agencies—could require the rich to report all their transactions, exposing their holdings to scrutiny while providing the data needed to valuate similar assets. “Too many people just start from the assumption that it’s impossible,” he says.

The scope of the possible started widening after the financial crisis, as the U.S. and then the European Union moved to crack down on offshore shelters. The Panama Papers, a leak of millions of documents from a Central American law firm, pushed policymakers further. “We’ve won the argument,” says Alex Cobham, CEO of Tax Justice Network, an independent international advocacy group. “More or less everyone thinks banking secrecy should be finished.”

In recent months, Zucman has devoted a great deal of energy to the question of how multinational corporations avoid taxes. He’s produced papers and policy briefs showing that U.S. multinationals shift almost half of their overseas profits to five havens—Ireland, the Netherlands, Singapore, Switzerland, and the Greater Caribbean, which includes Bermuda. “That is a huge problem for the sustainability of globalization,” he says. Countries and territories are engaged in a race to the bottom, Zucman argues, offering ever-lower corporate rates in the fear that companies will shift their profits elsewhere. He proposes to “annihilate” such competition by apportioning profits based on where sales were made.

These ideas might be nonstarters today, but Zucman professes to take the long view. Remember, he points out, that the U.S. Supreme Court ruled the income tax unconstitutional in 1895; it took a constitutional amendment to legalize it in 1913. “There’s a lot of policy innovation ahead of us,” he says.

When Zucman and Saez’s site, wealthtaxsimulator.org, went live in March, it sparked some of that hoped-for innovation. One proposal, posted on Twitter by Adam Bonica, a political science professor at Stanford, was for a 100% tax on wealth beyond $500 million. He based it on what he called “Beyoncé’s rule,” which he explains as, “Think of the most talented and hardest-working person you know, and think about how much money they have and how much money they deserve.” Queen Bey, he tweeted, has an estimated net worth in the neighborhood of half a billion dollars. “Let’s have Howard Schultz explain to us why he should be worth more than Beyoncé.”

Yet the Fed and its foreign counterparts seek to manipulate or, at least, to influence, interest rates both long-term and short-. They can’t seem to keep their hands off them.

😈💵🎩 Wall Street raises no protest against these intrusions. The artificially low rates of the past 10 years have advantaged investors, speculators and corporate promoters. They have deadened the risk sensors of even professional investors. They are 80-proof financial disinhibitors.

The same low rates—by some measures, the lowest in 3,000 years—have penalized savers, incentivized dubious risk-taking, expedited the growth in federal indebtedness, and perpetuated the lives of businesses that would have failed in the absence of easy credit. They have widened the gulf between rich and poor, thrown a spanner into our politics and inflated the cost of retirement.

In 2016, then candidate Trump complained about an “artificial stock market” and a “false economy,” blaming each on the legacy of the Fed’s near-zero percent interest rates. And just because he subsequently hired a new speech writer doesn’t mean he was wrong. He was, indeed, righter than he knew.

Agelbert NOTE: Trump was telling the truth in order to win the election. Obama, in 2008, told a truth in order to win the election. He said, on the Larry King show, months before the election, that, "No person makining less than $50,000 a year should have to pay taxes.".

BOTH Trump and Obama had ZERO interest in acting on these truths to improve the well being of we-the-people. Lke Obama, but on 'greed is good' steriods, once Trump got in power he used the Fed to further screw we-the-people. The next line in the article explains why:

SNIPPET 2:

The trouble is that the costs of radical monetary policy are dark and prospective; the gifts they bestow are bright and immediate.

Posted by: AGelbert

Global Capitalism: Live Economic Update with Richard D. Wolff. In connection with Wolff’s discussion of the main topic, he also covers: Libertarianism and socialism, Anti-capitalism and socialism, Democratic socialism: its multiple meanings. Co-sponsored by Democracy at Work and Judson Memorial Church

Posted by: AGelbert

Whatever form wealth-snatching takes — from the abuse of market power and information asymmetries to profiting from environmental degradation — there are specific policies and regulations that could both prevent the worst outcomes and yield far-reaching economic and social benefits. Having fewer people die from air pollution, drug overdoses, and “deaths of despair,” will mean having more people who contribute productively to society.

Regulation has had a bad name since Reagan and Thatcher made it synonymous with “red tape.” But regulation often improves efficiency. Anyone living in a city knows that without stoplights — a simple “regulation” governing the flow of cars through an intersection — we would live in perpetual gridlock. Without air quality standards, the smog in Los Angeles and London would be worse than the air in Beijing and Delhi.

The private sector 😈💵🎩 would never take it upon itself to curb pollution. Just ask Volkswagen VW, -3.17%.

Trump and the lobbyists he has appointed to dismantle the U.S. government are doing everything they can to strip awayregulations protecting the environment, public health, and even the economy.

For more than four decades after the Great Depression, a strong regulatory framework prevented financial crises, until it came to be seen, in the 1980s, as “stifling” innovation. With the first wave of deregulation came the savings and loan crisis, followed by more deregulation and the dot-com bubble in the 1990s, and then the global financial crisis in 2008.

At that point, countries around the world tried to rewrite the rules to prevent a recurrence. But now the Trump administration is doing what it can to reverse that progress.

So, too, the antitrust regulations implemented to ensure that markets work like they are supposed to — competitively — have been stripped back.

Posted by: Surly1

In May 2012 when New York Times reporter Andrew Ross Sorkin wrote his severely factually-challenged analysis of whether the repeal of the Glass-Steagall Act had led to the Wall Street collapse in 2008, he seemed to have an agenda of undermining Elizabeth Warren, then running for her first U.S. Senate seat from Massachusetts, in her push to restore the Glass-Steagall Act. That legislation, which was formally known as the Banking Act of 1933, created Federal insurance on deposits held in commercial banks while barring those banks from being under the same roof with the Wall Street casino – that is, high risk securities underwriting and trading firms known as investment banks and broker-dealers.

The legislation grew out of two intense years of Senate investigations from 1932-1934 which concluded that the “unsavory and unethical” practices by Wall Street securities trading firms had played the dominant role in the financial collapse of the 1930s. The Glass-Steagall legislation had protected the U.S. financial system from any catastrophic collapse for 66 years until its repeal under President Bill Clinton in 1999. (Clinton’s administration was heavily influenced by Wall Street figures.) Just nine years after the repeal, Wall Street would collapse in a replay of the early 1930s.

Sorkin wrote the following in his 2012 article, attempting to show that separating banks would not have prevented the collapse:

“The first domino to nearly topple over in the financial crisis was Bear Stearns, an investment bank that had nothing to do with commercial banking. Glass-Steagall would have been irrelevant. Then came Lehman Brothers; it too was an investment bank with no commercial banking business and therefore wouldn’t have been covered by Glass-Steagall either. After them, Merrill Lynch was next — and yep, it too was an investment bank that had nothing to do with Glass-Steagall.

“Next in line was the American International Group, an insurance company that was also unrelated to Glass-Steagall.”

The problem with Sorkin’s premise is that it is built on a mountain of errors. Lehman Brothers owned two Federally-insured banks — Lehman Brothers Bank, FSB and Lehman Brothers Commercial Bank. Lehman was brokering Federally-insured CDs all over Wall Street to retail customers through its bank. Lehman Brothers Commercial Bank, as of September 30, 2008, had $6.4 billion in assets and $5.65 billion in notional derivatives according to the Federal Deposit Insurance Corporation.

Merrill Lynch owned three Federally-insured banks and one of them, Merrill Lynch Bank USA, had assets of $61.6 billion and notional derivatives of $94.3 billion as of September 30, 2008 according to the Office of the Comptroller of the Currency. Merrill Senior VP, John Qua, stated in 2003 that “the combined balance sheet of our global banks is approximately $100 billion.” Merrill collapsed into the arms of Bank of America on September 14, 2008, the day before Lehman Brothers filed for bankruptcy protection.

Bear Stearns owned Bear Stearns Bank Ireland, which became part of JPMorgan Chase after its takeover of Bear with bailout support from the government. The bank was renamed JPMorgan Bank (Dublin) PLC. According to a previous statement from JPMorgan, “It is the only EU passported bank in the non-bank chain of JPMorgan and provides the firm with direct access to the European Central Bank repo window. It has also been added to the JPMorgan Jumbo issuance programs to issue structured securities for distribution outside the United States.” Structured securities is code for the instruments that blew up the U.S. financial system in 2008.

When Sorkin uses American International Group (AIG) in an attempt to undermine Elizabeth Warren’s continuing efforts to restore the Glass-Steagall Act, he is like the dumb tourist in a debate with Albert Einstein. Warren chaired the Congressional Oversight Panel that delivered its exhaustive report on June 10, 2010 on the failure and $185 billion government bailout of AIG.

At the time of the Wall Street collapse in 2008, AIG owned the Federally-insured AIG Federal Savings Bank. On June 30, 2008, it held $1 billion in assets. AIG also owned 71 U.S.-based insurance entities and 176 other financial services companies throughout the world, including AIG Financial Products (AIGFP) which blew up the whole company selling credit default derivatives and engaging in specious securities lending activities with Wall Street banks. What this has to do with Glass-Steagall is that the same deregulation legislation, the Gramm-Leach-Bliley Act that repealed Glass-Steagall in 1999, also amended the 1956 Bank Holding Company Act and allowed insurance companies and securities firms to be housed under the same umbrella in financial holding companies.

Not only did AIG own U.S. based deposit-taking banks but it owned Banque AIG, a bank it registered in France. Banque AIG was part of AIG Financial Products, the unit that blew up the giant insurer. Warren’s Congressional Oversight Panel reported the following regarding the dubious role of Banque AIG as a “balance sheet rental” facility:

“The regulatory capital swaps allowed financial institutions that bought credit protection from AIGFP to hold less capital than they would otherwise have been required to hold by regulators against pools of residential mortgages and corporate loans. A hypothetical example helps illustrate how this worked. According to the international rules established under Basel I, which generally applied to European banks prior to AIG’s collapse, a bank that held an unhedged pool of loans valued at $1 billion might be required to set aside $80 million, or 8 percent of the pool’s value. But if the bank split the pool of loans, so that the first losses were absorbed by an $80 million junior tranche, and AIGFP provided credit protection on the $920 million senior tranche, the bank could significantly reduce the amount of capital it had to set aside. Importantly, AIG’s regulatory capital swaps were sold by an AIGFP subsidiary called Banque AIG, which was a French-regulated bank.

“Under Basel I, claims on banks such as Banque AIG were assigned a lower risk weighting in the calculation of required capital reserves than the loans for which the counterparties were buying credit protection would have been assigned. This formula worked to the advantage of the counterparties, which could then use some of their regulatory capital savings to pay for the credit protection from AIGFP, and could use the remaining amount to make more loans, increasing their own leverage and risk. Because these swaps allowed banks to take on greater risk by shifting their liabilities to AIGFP, former AIG CEO Edward Liddy has referred to the deals as a ‘balance sheet rental.’ This business grew to become the largest portion of AIGFP’s CDS exposure, reflecting the demand for regulatory capital savings among European banks.”

The chart below shows how government bailout money came in the front door of AIG and went out the back door to bail out Wall Street banks and their foreign counterparts who had entangled themselves in derivative trades with AIG and securities lending. Those figures, by the way, refer to billions of dollars:

Where a Large Part of AIG’s Government Bailout Money Went. Figures are in Billions. Source: Congressional Oversight Panel

Senator Warren, now running for President, is viewed as a threat by Wall Street because of her institutional knowledge of how it perpetrated the crimes that led to the greatest financial collapse since the Great Depression. The Federal Reserve Bank of New York, which implemented the majority of the $29 trillion bailout program, is also nervous about a potential President Warren.

In addition to knowing the grainy details of what led to the crash, Warren also knows where the money went and why. At a March 3, 2015 Senate hearing on Federal Reserve Accountability and Reform, Warren had this to say:

“During the financial crisis, Congress bailed out the big banks with hundreds of billions of dollars in taxpayer money; and that’s a lot of money. But the biggest money for the biggest banks was never voted on by Congress. Instead, between 2007 and 2009, the Fed provided over $13 trillion in emergency lending to just a handful of large financial institutions. That’s nearly 20 times the amount authorized in the TARP bailout.

“Now, let’s be clear, those Fed loans were a bailout too. Nearly all the money went to too-big-to-fail institutions. For example, in one emergency lending program, the Fed put out $9 trillion and over two-thirds of the money went to just three institutions: Citigroup, Morgan Stanley and Merrill Lynch.

“Those loans were made available at rock bottom interest rates – in many cases under 1 percent. And the loans could be continuously rolled over so they were effectively available for an average of about two years.”

Warren is talking about the Fed’s Primary Dealer Credit Facility (PDCF) and her math is spot on.

The obscene and unprecedented nature of secretly loaning trillions of dollars to miscreant banks has not been lost on Warren. This was the first time since 1936 that the Federal Reserve had used its Section 13(3) emergency lending powers. In the 1930s the loans amounted to $1.5 million or $27.3 million in today’s dollars. That’s a pretty far cry from $29 trillion.

Wall Street is also edgy over Warren because of her knowledge that the Financial Crisis Inquiry Commission, that also investigated the collapse under a statutory mandate, clearly thought some Wall Street executives should have gone to jail or at least been criminally prosecuted. On September 15, 2016, Warren sent a detailed, 20-page letter to the Inspector General of the Department of Justice asking for a review of those FCIC referrals. When only silence on the matter ensued from the Justice Department, Wall Street On Parade filed a Freedom of Information Act request in October 2017. (You can read the full response we received and our reporting on the matter here.) The DOJ is effectively denying the public any accountability for its actions in what was the second greatest financial crash in U.S. history.

Keep all of this in mind if you begin to read more snarky commentary from Andrew Ross Sorkin or others closely linked to Wall Street about Senator Warren or her efforts to restore the Glass-Steagall Act.

Posted by: AGelbert

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[S1 E13] Rate and Mass of Growth

Prof. Harvey talks about rate of growth vs. mass of growth, and argues that the latter, often ignored, is actually more significant and deserves careful consideration and analysis.

This week on Economic Update, Professor Wolff does something a little different. He dives deep into the 200+ year old debate and struggle between capitalism and socialism and looks into how it has become both confused and confusing. The different definitions of these systems make honest, balanced discussions and evaluations of them increasingly more difficult. Now that socialism is rising yet again to challenge capitalism, the debate demands a closer examination of the terms and their numerous, new and different meanings.

Posted by: AGelbert

Posted by: AGelbert

This quote from a fellow with the "Gringo Viejo" internet handle is, IMHO, accurate:

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I'd like to think I'm fairly observant and watching the stock and bond markets these last six months has made me aware of something. It's as if beneath the bravado, the back slapping, the goldilocks, everything is great news reportage, there's the smell of fear. It's almost palpable.

Posted by: AGelbert

Dona;d Trump's NAFTA 2.0. is only a marginal change from the original NAFTA and complete with all the problems NAFTA brought with it including the damage to the environment, working people, and unions.

Posted by: AGelbert

In addition to the fact that U.S. consumer price inflation has been low since the Great Recession because inflation has been concentrated in asset prices, there are many reasons to believe that consumer price inflation is actually running a lot hotter than mainstream economists think it is (or want you to think it is). According to John Williams, the proprietor of Shadow Government Statistics, the U.S. CPI formula has been changed over the years for the purpose of understating inflation.

For example, if we use the same CPI formula as we did in 1980 (blue line), it shows that inflation has been running at a nearly 10% annual rate for the past decade rather than the roughly 2% annual rate that today’s CPI (red line) indicates:

ABOUT THE PROGRAMThe Thom Hartmann Program is the leading progressive political talk radio show for political news and comments about Government politics, be it Liberal or Conservative, plus special guests and callers

THIS WEEK'S TOPICS (w/timestamps):00:56 - Updates on the Los Angeles strippers’ strike;02:34 - Trump failure to end the U.S. trade deficit;04:57 - UN reports on protests against capitalist driven inequality and the governmental repression of those protests;06:05 - the tragic social effects of the closure of GM’s Lordstown, Ohio factory;07:42 - and the reduction of bank regulations after 10 years of massive bank misdeeds by Trump and FED:10:34 - announcements.15:16 - SPECIAL GUEST: Prof. Wolff interviews journalist Bob Hennelly on underpaid EMTs and the right-wing hostility toward the Green New Deal's proposal for a universal right to a job.

Posted by: AGelbert

Agelbert NOTE: Notice that the Federal Reserve deliberately low balled (i.e. LIED ABOUT) the total amount of buybacks in 2018 (see article snippet bellow). That said, there is no doubt that buybacks, even from the Fed perspective, are right there with Fed stock bubble inflating intervention in keeping the Stock Market artificially rising. As the chart above clearly shows, the beneficiaries of this FINANCIAL SCAM are the crooks at the top, NOT we-the-people.

High equity exposure among major investor categories increases the importance of buybacks as a source of equity demand. Equity allocations for each of the major investor categories are elevated vs. history. Aggregate equity allocation totals 44% across households, mutual funds, pension funds, and foreign investors (86th percentile relative to the past 30 years). In contrast, we estimate that allocation to debt and cash are only at the 39th and 3rd percentiles, respectively.

SNIPPET 2:

So as Goldman turns from a carrot to a stick approach, one can summarize the latest Goldman report by observing that very bad things will happen if Congress proceeds with its intentions to ban buybacks. There is a silver lining: while Goldman previously sided with the generally clueless segment of "financial experts", claiming that the impact of buybacks on stocks is at best muted, now that buyback legislation is becoming an increasingly greater threat by the day, Goldmancan finally admit the truth: without buybacks the market will crash.

adonisdemiloSo, logic suggests that without buybacks the health and wealth of the Market is a pile of crap.

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fulliautomatixGoldman talking its book.

Allowing stock buy-backs funded by debt in the age of TBTF is effectively corporations holding the taxpayer to ransom: TBTF means low interest rates, means stable and directed (by corporate, of course) governance and means the rent seeking brought about by the low growth environment is rewarded. Nowhere is there economic growth as a result.

Buy-backs nor funded by borrowing (where you might consult with GS for advice, planning and muppetising) are something different.

On this week's show Prof. Wolff presents an in-depth analysis of UBI shows its advantages over most welfare, safety net systems. An even better alternative would avoid capitalism's unnecessary production of unemployment because it utilizes technical progress (rising productivity) for profits. The alternative benefits workers' leisure rather than profits. It is more democratic and avoids splitting people into unemployed vs employed, non-poor vs poor population.

ABOUT THE PROGRAMThe Thom Hartmann Program is the leading progressive political talk radio show for political news and comments about Government politics, be it Liberal or Conservative, plus special guests and callers

On this week's show Prof. Wolff presents an in-depth analysis of fascism as massive government intervention to protect and save a crashing capitalism. We focus on today's examples, historical parallels (in Germany and Italy), and how "strong men" leaders push fascist agendas. We discuss how fascism and socialism differ and how nationalism serves as fascism's social "disguise.

Posted by: AGelbert

Ed Butowsky’s motivation to create the Chapwood Index came from a desire to help people rescue their finances from fixed-income despair after the passing of his mother. Ed’s mother was divorced, and because of the CPI, her alimony payments were under-adjusted. They failed to reflect her actual cost of living percentage increase year in and year out. Slowly, her ability to make ends meet deteriorated, and she was forced to take a job at Saks Fifth Avenue in order to afford birthday gifts for her grandchildren and other necessities. When Ed’s mother was diagnosed with cancer, she suffered through agonizing rounds of chemotherapy and continued working at Saks because she had no other way to meet her financial needs.

How did Butowsky’s mother end up like this? She fell victim to a fixed income based on the flawed CPI that failed to accurately reflect inflation.

Posted by: AGelbert

In “Winners Take All: The Elite Charade of Changing the World,” Anand Giridharadas compels us to take a deeper look at elite leaders, their institutions, and their initiatives to make the world a better place. “In the very era in which elites have done so much to help, they have continued to hoard the overwhelming share of progress, the average American’s life has scarcely improved, and virtually all of the nation’s institutions, with the exception of the military, have lost the public’s trust.”

Today's elites are some of the more socially concerned individuals in history. Yet, according to Giridharadas, while their philanthropic missions may attempt to reform the root causes of unjust systems, many elite initiatives serve only to maintain the very power structures they claim they want to fix. So, who really benefits? To what extent are the elite working to create real progress and systemic change for people and communities?

Anand Giridharadas was a foreign correspondent and columnist for the The New York Times and currently teaches journalism at New York University. He joins us for an in-depth discussion on elite leaders, how their philanthropic efforts preserve the unjust status quo, and how communities might work together to create a more participatory democracy.

The latest developments about Trump's relationship to Deutsche Bank could be the unraveling with Deutsche Bank and Trump facing a serious legal probe on bank fraud by the House Financial Services Committee chaired by Rep. Maxine Waters

Posted by: AGelbert

The stock market is the sole reason for the FED's intervention for some time now. If it goes up fine, if not, they intervene and stimulate it to do so. Basically what you have is a positive feed back loop with no end in sight and the consumer, who is clearly NOT the beneficiary of the FED's action, paying the piper and getting the bill through "managed" inflation.

The FED chose to help crony capitalists, the 1% at the expense of the rest of the nation. THAT was their epic moment of denial and ultimate corruption that cannot be fixed. Everyone knew that massive printing maintained the ethically bankrupt corrupt status quo as far as TBTF went and cemented in place political views that have since become horribly anti-constitutional in their fascist leaning.

The FED is our main economic problem in this country and we're at a point where we cannot contain it without someone facing a ton of pain.

The FED is the main reason there is a us vs them dividing line in this country. They are the ones responsible for this nonsense and it will not end well.

Wall Street dances round its Golden calf, the DOW. Trump, PPT, dictator Ping and all the other suckers can do what they want. It won't help forever. The Question is not if, but only when the bubble will burst.